A Tale of Two Cities

Because of increasing labor costs, it's only a matter of time before China loses its edge in the offshoring market. This year, China had a 15% rate of inflation significantly increasing the cost of living so, for each of the next five years, the government plan calls for 13-14% hikes in annual pay.* Bargain-hunting foreign interests have already begun an exodus as they move their orders to factories in India, Thailand, East Africa, Cambodia and Vietnam.

Right now, there are dozens of dental laboratories in the major export cities of Zhuhai, Shenzhen and Beijing, many vying for a piece of the offshore market. Not all of them adhere to strict operating standards and use of certified materials, but some of them do and that is where our tale of two cities begins.
In September, prompted by an invitation from ProLab Solutions, LMT's Judy Fishman, along with industry peers, visited two Chinese dental laboratories. See her editorial, The Wild, Wild East by clicking on the link at the bottom of the page for more details.

Zhuhai, China:

Veden Dental Labs Makes Customer Service a Top Priority

In Zhuhai, DAMAS-certified Veden Dental Labs, Inc. is sharpening its business strategies in preparation for the changes it sees coming. Its business within its own country is quite strong and Veden plans to capitalize on this by opening dental clinics throughout China.

Though still in the experimental phase, it already has a "test" clinic in Shanghai. The clinic employs a dentist from Alaska and another from Great Britain, not only because "there's an acute shortage of dentists here," according to Sophia Wu, Veden's Vice President, but because the newly and superbly wealthy Chinese nationals are "westernizing" and that includes a desire for "The [bright and white] Western Smile."

Historically, "want" dentistry has not been valued in China; the culture says "people only see your teeth when you smile." But according to Wu, things are changing and there's likely to be a lot of demand for restorative dentistry down the road.

In the meantime, Veden derives about 60-70% of its offshore business from laboratories in the U.S. Located on a lush and modern 40,000-sq-ft, gated campus in a modernized town that was once a fishing village, the laboratory is heavily focused on individualized customer service.

The campus is beautiful and provides a home away from home by creating a social community for its employees when they aren't working. The employee dormitories are surrounded by a par-three golf course, a basketball court, cafeteria, pool table, and landscaped gardens with water features and geese.

The main building that houses the four-story laboratory also houses VIP sleeping facilities for guests; an apartment for Vice President Wu; and a master suite for Veden's President, George Chang, so everyone can be available as needed, 24/7.

Chang, originally from Taiwan (as is Wu), transformed Veden into a multinational laboratory, with transport services through Hong Kong, seven years ago.

Its quality assurance department--with a staff of 11--is available during U.S. daytime hours. There is also a technical liaison in the U.S. who acts as go-between on all technical matters between here and Zhuhai. "It's of critical importance to us that clients get immediate assistance, regardless of time of day," says Edwin Tse, Senior Consultant.

In fact, its largest clients--whether here or in Europe--have dedicated technical teams in Zhuhai. (France is its second largest client base.) "The key purpose is to ensure that prescriptions are properly followed. Each client has different standards--and different expectations--so we can provide customized service accordingly," explains Wu. The relationships built with its clients also help Veden discover ways to continuously upgrade its service capabilities.

Using Captek, Empress, e.max, Valplast, Projet, Noritake, CEREC, Wieland, KATANA and more (you get the picture: familiar and well-known brands), Veden's 1,100 technicians and 1,300 administrative employees work 10-hour shifts so that production continues almost around the clock. The laboratory also has a complete CAD/CAM department and a robust training program that includes the use of microscopes. Its attention to this sort of detail backs up the company mission and, literally, defines its name: Value Excellence Dedication Education Nobility.

"Technology is going to lead our industry," Chang told us. "I hope your visit here can help clear up some misperceptions about the work being done in China so others can make an educated decision that helps their own business prosper. We think we offer a means of providing a higher margin of profit and offer an alternative when personnel are hard to find."

Shenzhen, China:

Modern Dental Laboratory Focuses On Quality, Growth and Giving

In Shenzhen, Modern Dental Laboratory (Modern) is located amid the hustle and bustle that lures those who like to explore. The seven-story, immaculate no-nonsense building sits within a gated and secured campus that contains six buildings, including four dormitories for its 2,000-plus technicians who work in two eight-hour shifts.

Modern also makes sure its employees have ample entertainment facilities available to keep their work-play lives in balance. The average tenure of a technician at Modern is seven to eight years, unusually long because of the sense of community fostered by the environment.

The main gathering place for those off shift is an indoor-outdoor social hall with pool table, karaoke/dance hall, movie theater, library, computer room and canteen located about two stories up from street level. There's also a basketball court. "Land in Shenzhen is very expensive," says Director and CEO Godfrey Ngai, in part, perhaps, to explain why campus buildings tower over others in the immediate vicinity.

A self-proclaimed workaholic, Ngai keeps his focus on two things: meeting the needs of his employees by making sure they are well trained so they have the opportunity to grow and meeting the needs of the patients through his clients. Ngai notes the trend among his clients is moving away from PFMs toward zirconia but, so far, it isn't a significant shift. Beryllium alloys were banned from use in China years ago.

As with Veden President George Chang (see page 44), Ngai's mission during our visit was to emphasize that work coming from his laboratory should not be lumped together with any perception of poor quality because of their ability to use less costly labor. Modern achieves its objectives through consistency--in workflow and infection control--and transparency in how it conducts its business.

Considered to be the largest dental laboratory in the world--certainly neck and neck with Glidewell--Modern has operations in the U.S. but does business all over the world. Unlike Veden, most of Modern's work comes from outside the U.S. "Modern has grown into the number one laboratory used in Europe and Australia. Our aim is to exceed client expectations," Ngai says, noting it's one of the earliest dental laboratories to attain ISO13485 certification.

"We've been more visible in the U.S. since 2009 but we don't want to grow so fast we can't keep up with demand," he says (this year's revenue is 20% higher than that of 2010).

In 2009, Seattle-based Northwest Laboratories, owned by Patrick Tessier, merged with Modern to form Modern Dental Laboratory USA (Modern USA), with Tessier as CEO. The lab services dentists across the U.S. with additional service centers in Boston, Chicago and Los Angeles. With steady growth in mind, the lab was recognized by the Puget Sound Business Journal as one of the 100 fastest-growing private companies in Washington for the past three years and, for the past two years, the Journal recognized it as one of Washington's top corporate philanthropists as well.

Modern USA is committed to being a responsible member of the local dental community and supports such organizations and causes as Donated Dental Services, Los Angeles City College Dental Technology Program, University of Washington School of Dentistry, Washington Oral Health Foundation and Seattle King County Dental Foundation, among others.

See Judy Fishman's editorial, The Wild, Wild East by clicking on the link below for more details.

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